Voluntary redundancy is where employers provide a financial incentive designed to entice their employees to voluntarily take a redundancy rather than the employer having to make employees redundant.
A genuine redundancy is said to be a situation where an employer no longer needs an employee performing a particular position or role. This can be due to different factors such as:
- an employer’s business becoming bankrupt or insolvent;
- an employee’s job is being taken over by new technology;
- business sales have slowed down so therefore not as many staff are needed;
- a merger or takeover; or
- the employer’s business restructures or reorganises and they no longer need the particular role.
Why would you take a voluntary redundancy?
There are many reasons why someone might take up the option of a voluntary redundancy. For example, someone who is close to retiring may take it to get an extra amount for their retirement, or someone may be wanting to change their career and it could help them financially while they do so.
How much is paid?
The Fair Work Act 2009 (Cth) states that if an employee’s employment is terminated due to redundancy, the employee is entitled to redundancy pay as long as he/she has provided continuous service of over 12 months to their employer.
The standard redundancy payment schedule is based on the number of years that an employee has worked for the business. For example:
- more than 1 year but less than 2 years of continuous service entitles an employee to 4 weeks of redundancy pay.
- more than 5 years but less than 6 years of continuous service entitles an employee to 10 weeks of redundancy pay.
With a voluntary redundancy, an employer will often offer more than the standard redundancy pay to incentivise employees.
Who is not entitled to redundancy pay?
Some people are not entitled to redundancy pay, including:
- an employee who has provided their company with less than 1 year continuous service;
- casual employees;
- an employee of a small business employer (less than 15 employees);
- an employee only employed for a specific time or a specific purpose; or
- an employee who has had his/her employment terminated due to serious misconduct.